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Chapter 5 Emerging Modes of Business LEARNING OBJECTIVES After studying this chapter, you should be able to: state the meaning o...

Chapter 5 Emerging Modes of Business LEARNING OBJECTIVES After studying this chapter, you should be able to: state the meaning of e-business; explain the process of online buying and selling as a part of e-business; distinguish e-business from traditional business; state benefits of switching over to electronic mode; explain requirements for a firm’s initiation into e-business; identify major security concerns of electronic mode of doing business; discuss the need for business process outsourcing; and appreciate the scope of business process outsourcing. 2024-25 Chapter 5.indd 113 9/2/2022 2:12:15 PM  114 BUSINESS  STUDIES “Let us do some shopping,” Rita woke up Rekha, her friend from the home-village who had come to Delhi during the vacations. “At this hour well past midnight,” said Rekha rubbing her eyes, “Who would be sitting with his shop open for you?” “Oh! Perhaps I could not convey it properly. We are not going anywhere! I am talking about online shopping over the internet!” told Rita. “Oh yes! I have heard of online shopping, but have never done any,” Rekha said, “What would they be selling over the internet, how will they deliver, What about payment… and why is it that internet has not yet become as popular in the villages? As Rekha was grappling with these questions, Rita had already logged on to one of India’s largest online shopping mall. 5.1 Introduction responsible for these two new modes of business would be in order. The way b u siness is d o ne has The newer modes of business are undergone fundamental changes not new business. These are rather during the last decade or so. The simply the new ways of doing business manner of conducting business is attributable to a number of factors. referred to as the ‘mode of business,’ You are aware that business as an and, the prefix ‘emerging’ underlines activity is aimed at creating utilities the fact, that these changes are or value in the form of goods and happening here and now, and, that services which the household and these trends are likely to continue. industrial buyers purchase for meeting In fact, if one were to list the their needs and wants. In an effort to three strongest trends that are improve the business processes — be it shaping business, these would be: (i) digitisation — the conversion of purchase and production, marketing, text, sound, images, video, and other finance or human resources business content into a series of ones and zeroes managers and business thinkers that can be transmitted electronically, keep evolving newer and better ways (ii) outsourcing, and, (iii) inter- of doing things. Business firms have nationalisation and globalisation. You to strengthen their capabilities of will read about international business creating utilities and delivering value in Chapter 11. In this chapter, we will to successfully meet the competitive be familiarising you with the first two pressures and ever-growing demands developments, i.e., digitisation (a term of consumers for better quality, lower from electronics) of business — also prices, speedier deliveries and better referred to as electronic business customer care. Besides, the quest for (e-business), and Business Process benefitting from emerging technologies Outsourcing (BPO). Before we do so, means that business as an activity a brief discussion about the factors keeps evolving. 2024-25 Chapter 5.indd 114 9/2/2022 2:12:15 PM  EMERGING MODES OF BUSINESS 115 5.2 e-Business transactions and functions conducted electronically, including the more If the term business is taken to mean popular gamut of transactions called a wide range of activities comprising industry, trade and commerce; ‘e-commerce.’ e-commerce covers a e-business may be defined as the firm’s interactions with its customers conduct of industry, trade and and suppliers over the internet. commerce using the computer e-business includes not only networks. The network you are most e-commerce, but also other familiar with as a student or consumer electronically conducted business is the internet. Whereas internet functions such as production, is a public thorough way, firms inventory management, product use more private, and, hence more development, accounting and finance secure networks for more effective and and human resource management. efficient management of their internal e-business is, therefore, clearly much functions. more than buying and selling over the e-business versus e-commerce: Internet, i.e., e-commerce. Though, many a times, the terms e-business and e-commerce are used 5.2.1 Scope of e-Business interchangeably, yet more precise definitions would distinguish between We have mentioned above that the the two. Just as the term ‘business’ scope of e-business is quite vast. is a broader term than ‘commerce’, Almost all types of business functions e-business is a more elaborate term such as production, finance, marketing and comprises various business and personnel administration as well Figure 5.1 Business to Business e-Commerce 2024-25 Chapter 5.indd 115 9/2/2022 2:12:15 PM  116 BUSINESS  STUDIES as managerial activities like planning, A network of computers is used for organising and controlling can be placing orders, monitoring production carried out over computer networks. and delivery of components, and The other way of looking at the scope making payments. Likewise, a firm may of e-business is to examine it in strengthen and improve its distribution terms of people or parties involved in system by exercising a real time (as it electronic transactions. Viewed from happens) control over its stock-in- this perspective, a firm’s electronic transit as well as that with different transactions and networks can be middlemen in different locations. visualised as extending into three For example, each consignment of directions viz., (i) B2B which is a firm’s goods from a warehouse and the interactions with other businesses, stock-at-hand can be monitored and (ii) B2C i.e., a firm’s interactions with replenishments and reinforcements its customers and (iii) intra-B or a can be set in motion as and firm’s internal processes. when needed. Or else, a customer’s A brief discussion of various specifications may be routed through constituents of e-business and inter- the dealers to the factory and fed and intra-transactions among them is into the manufacturing system given as below: for customised production. Use of (i) B2B Commerce: Here, both e-commerce expedites the movement of the parties involved in e-commerce the information and documents; and of transactions are business firms, and, late, money transfers as well. hence the name B2B, i.e., business- Historically, the term e-commerce to-business (see Figure 5.1). Creation originally meant facilitation of B2B o f u t i l i t i e s o r d e l i v e r i n g v alue transactions using Electronic Data requires a business to interact with Interchange (EDI) technology to send a number of other business firms and receive commercial documents which may be suppliers or vendors like purchase orders or invoices. of diverse inputs; or else they may be (ii)  B2C Commerce: As the name a part of the channel through which implies, B2C (business-to-customers) a firm distributes its products to the consumers. For example, the transactions have business firms at manufacture of an automobile one end and its customers on the requires assembly of a large number other end. Although, what comes to of components which in turn are being one’s mind instantaneously is online manufactured elsewhere — within the shopping, it must be appreciated vicinity of the automobile factory or that ‘selling’ is the outcome of the even overseas. To reduce dependence marketing process. And, marketing on a single supplier, the automobile begins well before a product is offered factory has to cultivate more than one for sale and continues even after the vendor for each of the components. product has been sold. B2C commerce, 2024-25 Chapter 5.indd 116 9/2/2022 2:12:15 PM  EMERGING MODES OF BUSINESS 117 Benefits of e-Commerce 1. Business Organisation: (i) Expands the marketplace to national and international markets, (ii) Gradual decline in the cost of operations, (iii) Facilitates ‘pull’ supply chain management, (iv) Competitive advantage over competitors, (v) Proper time management and support business processes, and (vi) Small firms co-exist with big firms (win-win). 2. Benefits to Consumers and Society (i) Flexibility, (ii) Competitive price/discounts/waive offs, (iii) More options and choices and Customised products, (iv) Quick and Timely delivery (digitised products), (v) Employment potential, (vi) Facilitate e-Auctions and e-Tenders, (vii) Interaction with consumers, (viii) Wider outreach. therefore, entails a wide gamut of product features to be tailor-made to marketing activities such as identifying suit their requirements, but also the activities, promotion and sometimes convenience of delivery and payment even delivery of products (e.g., music at their pleasure. With the onset of or films) that are carried out online. e-commerce, all this has become a e-Commerce permits conduct of these reality. activities at a much lower cost but high Further, B2C variant of e-commerce speed. For example, ATM speeds up enables a business to be in touch with withdrawal of money. its customers on round-the-clock Customers these days are basis. Companies can conduct online becoming very choosy and desire surveys to ascertain as to who is individual attention to be given to buying what and what the customer them. Not only do they require the satisfaction level is. ATM speeds up Withdrawal of Money e-Commerce greatly facilitates and speeds up the entire B2C process. Withdrawal of one’s own money from banks was, for example, a tedious process in the past. One had to go through a series of procedural formalities before he or she was able to get the payment. After the introduction of ATMs, all that is fast becoming a history now. The first thing that occurs is that the customer is able to withdraw his money, and the rest of the back-end processes take place later. 2024-25 Chapter 5.indd 117 9/2/2022 2:12:15 PM  118 BUSINESS  STUDIES By now, you might have formed the products made as per the opinion that B2C is a one-way traffic, requirements of the individual i.e., from business-to-customers. customer. In a similar vein, closer But do remember that its corollary, computer-based interactions among C2B commerce is very much a reality the other departments makes it which provides the consumers with possible for the firm to reap the freedom of shopping-at-will. advantages of efficient inventory Customers can also make use of call and cash management, greater centres set up by companies to make utilisation of plant and machinery, toll free calls to make queries and lodge effective handling of customers’ complaints round the clock at no extra orders, and effective human resource cost to them. The beauty of the process management. is that one need not set up these call Just as intercom facilitated voice centres or help lines; they may be communication within the office, outsourced. We shall discuss this intranet facilitates multimedia and aspect later in the section devoted to even 3-D graphic communication Business Process Outsourcing (BPO). among organisational units for well- (iii) Intra-B Commerce: Here, parties informed decisions, permitting better involved in the electronic transactions coordination, faster decisions and are from within a given business firm, speedier workflows. Take for example, hence, the name intra-B commerce. As a firm’s interactions with its employees, noted earlier too, one critical difference sometimes referred to as B2E between e-commerce and e-business commerce. Companies are resorting is that, e-commerce comprises a to personnel recruitment, interviewing business firm’s interaction with its and selection, training, development and education via e-commerce suppliers, and distributors/other (captured in a catch-all phrase business firms (hence, the name B2B) ‘e-learning’). Employees can use and customers (B2C) over the internet. electronic catalogues and ordering While e-business is a much wider forms and access inventory information term and also includes the use of for better interaction with the intranet for managing interactions and customers. They can send field reports dealings among various departments via e-mail and the management can and persons within a firm. It is largely have them on real time basis. In due to use of intra-B commerce that fact, Virtual Private Network (VPN) today it has become possible for technology would mean that employees the firms to go in for flexible do not have to come to office. Instead, manufacturing. Use of computer in a way the office goes to them and networks makes it possible for the they can work from wherever they marketing department to interact are, and at their own speed and time constantly with the production convenience. Meetings can be held department and get the customised online via tele/ video conferencing. 2024-25 Chapter 5.indd 118 9/2/2022 2:12:15 PM  EMERGING MODES OF BUSINESS 119 (iv) C2C Commerce: Here, the to Pay Pal. From there, PayPal notifies business originates from the consumer the seller that they will hold the money and the ultimate destination is also for them until the goods have been consumers, thus the name C2C shipped and accepted by the buyer. commerce (see Figure 5.2). This An important C2C area of type of commerce is best suited for interactive commerce can be the dealing in goods for which there is formation of consumers’ forum and no established market mechanism, pressure groups. You might have for example, selling used books or heard of Yahoo groups. Like a vehicle clothes either on cash or barter basis. owner in a traffic jam can alert others The vast space of the internet allows via message on radio (you must have persons to globally search for potential heard traffic alerts on FM) about the buyers. Additionally, e-commerce traffic situation of the area he is stuck technology provides market system in; an aggrieved customer can share security to such transactions which his experience with a product/service/ otherwise would have been missing if vendor and warn others by writing just the buyers and sellers were to a message and making it known to the interact in anonymity of one-to-one entire group. And, it is quite possible transactions? An excellent example of that the group pressure might result this is found at eBay where consumers in a solution of this problem. sell their goods and services to other From the foregoing discussion consumers. To make this activity concerning scope of e-business, it is more secure and robust, several clear that e-business applications are technologies have emerged. Firstly, varied and many. eBay allows all the sellers and buyers to rate one another. In this manner, e-Business versus Traditional future prospective purchasers may see Business that a particular seller has sold to more than 2,000 customers — all of whom By now, you must have formed rate the seller as excellent. In another an idea as to how e-enabling has example, a prospective purchaser may radically transformed the mode of see a seller who has previously sold doing business. Table 5.1 (page 124) only four times and all four rate the provides a feature on comparison seller poorly. This type of information between traditional business and is helpful. Another technology that e-business. has emerged to support C2C activities A comparative assessment of the is that of the payment intermediary. features of traditional and e-business PayPal is a good example of this kind. as listed in Table 5.1 points towards Instead of purchasing items directly the distinct benefits and limitations of from an unknown, untrusted seller; e-business that we shall discuss in the the buyer can instead send the money following paragraphs. 2024-25 Chapter 5.indd 119 9/2/2022 2:12:15 PM  120 BUSINESS  STUDIES e-commerce makes flexible Manufacturing and Mass Customisation possible­ Customised products have traditionally been made to order by craftsmen and have, therefore, been expensive and delivery times have been long. Industrial revolution meant that organisations could engage in mass production and could sell homogeneous products rolled out of the factory at a lower cost due to the economies of scale. Thanks to e-commerce, now organisations can offer customised products/ services at lower costs, that previously were only associated with mass produced commodity items. Here are a few examples: 401(k) Forum (US) ­ ustomises educational content and investment advice based C on individual interviews.­ Acumin Corp. (US) ­Customises vitamin pills specified by using the Internet. Customers fill in lifestyle and health questionnaire.­ Dell (US) ­ Build your own PC. Green Mountain Electricity supplier (but not generator). Customers could select Energy Resources sources for their electricity, e.g., hydro, solar, etc.­ (US) Levi Jeans Tailored jeans service. Web service suspended after complaints (Original Spin) by retailers but service now offered through retailers. Offers (US) 49,500 different sizes and 30 styles for a total of nearly 1.5 million options for a cost of just $55. Orders are sent by net and jeans are produced and shipped in 2-3 weeks.­ N.V. Nutsbedrijf Westland supplies natural gas to many tulip growers in the Westland Netherlands. Computers in the greenhouse help greenhouse (Newzealand) ­ owners maintain temperature, CO2 output, humidity, light and other factors in the most cost-efficient manner.­ National Bicycle Custom built bicycles within 2/3 days of taking the order.­ (Japan) Simon and Teachers can order customised books specifically matched to Schuster (US) individual course and student needs. Xerox DocuTech printers are generating in excess of 125,000 customised books a month.­ Skyway (US) ­ Skyway is a logistics company offering whole order delivery. Shipments from multiple origins with different modes of transport can be merged in transit and delivered as a single order with one set of paperwork to the store or consumer.­ SmithKline Creates customised stop smoking programme for customers. Beecham (US) Uses call centre questionnaire to generate a series of personalised communications.­ Source: Adapted from http://www.managingchange.com­ 2024-25 Chapter 5.indd 120 9/2/2022 2:12:15 PM  EMERGING MODES OF BUSINESS 121 Place advertisement Website Want to sell products Want to buy products Receives products Customer Receives money Customer Figure 5.2 Consumer to Consumer e-Commerce (C2C) 5.3 Benefits of e-Business located closest to his location. The food is delivered and the payment collected (i) Ease of formation and lower by the restaurant staff and the amount investment requirements: Unlike a due to you as a client solicitor is host of procedural requirements for credited to your account through an setting up an industry, e-business is relatively easy to start. The benefits of electronic clearing system. internet technology accrue to big or (ii) Convenience: Internet offers the small business alike. In fact, Internet convenience of ‘24 hours × 7 days is responsible for the popularity of a week × 365 days’ a year business the phrase: ‘networked individuals that allowed Rita and Rekha to go for and firms are more efficient than shopping well after midnight. Such networthed individuals.’ This means flexibility is available even to the that even if you do not have much organisational personnel whereby they of the investment (networth) but can do work from wherever they are, have contacts (network), you can do and whenever they may want to do it. fabulous business. Yes, e-business is truly a business as ­Imagine a restaurant that does not enabled and enhanced by electronics have any requirement of a physical and offers the advantage of accessing space. Yes, you may have an online anything, anywhere, anytime. ‘menu’ representing the best of cuisines (iii) Speed: As already noted, much of from the best of restaurants the world- the buying or selling involves exchange over that you have networked with. of information that Internet allows The customer visits your website, at the click of a mouse. This benefit decides the menu, places the order becomes all the more attractive in the that in turn is routed to the restaurant case of information-intensive products 2024-25 Chapter 5.indd 121 9/2/2022 2:12:15 PM  122 BUSINESS  STUDIES Box A Some e-Business Applications e-Procurement: It involves internet-based sales transactions between business firms, including both, “reverse auctions” that facilitate online trade between a single business purchaser and many sellers, and, digital marketplaces that facilitate online trading between multiple buyers and sellers. e-Bidding/e-Auction: Most shopping sites have ‘Quote your price’ whereby you can bid for the goods and services (such as airline tickets!). It also includes e-tendering whereby one may submit tender quotations online. e-Communication/e-Promotion: Right from e-mail, it includes publication of online catalogues displaying images of goods, advertisement through banners, pop-ups, opinion poles and customer surveys, etc. Meetings and conferences may be held by the means of video conferencing. e-Delivery: It includes electronic delivery of computer software, photographs, videos, books (e-books) and journals (e-journals) and other multimedia content to the user’s computer. It also includes rendering of legal, accounting, medical, and other consulting services electronically. In fact, internet provides the firms with the opportunities for outsourcing of a host of Information Technology Enabled Services (ITES) that we will be discussing under business process outsourcing. Now, you can even print the airlines and railway tickets at home! e-Trading: It involves securities trading, that is online buying and selling of shares and other financial instruments. For example, sharekhan.com is India’s largest online trading firm. such as softwares, movies, music, the global market; on the other hand, e-books and journals that can even be it affords to the buyer a freedom to delivered online. Cycle time, i.e., the choose products from almost any time taken to complete a cycle from part of the world. It would not be an the origin of demand to its fulfilment, exaggeration to say that in the absence is substantially reduced due to of internet, globalisation would have transformation of the business been considerably restricted in scope processes from being sequential to and speed. becoming parallel or simultaneous. (v) Movement towards a paperless You know that in the digital era, money society: Use of Internet has considerably is defined as electronic pulses at reduced dependence on paperwork the speed of light, thanks to the and the attendant ‘red tape.’ You know electronic funds transfer technology that Maruti Udyog does bulk of its of e-commerce. sourcing of supplies of materials and (iv) Global reach/access: Internet is components in a paper less fashion. truly without boundaries. On the one Even the government departments and hand, it allows the seller an access to regulatory authorities are increasingly 2024-25 Chapter 5.indd 122 9/2/2022 2:12:15 PM  EMERGING MODES OF BUSINESS 123 moving in this direction whereby they And, this requirement is responsible allow electronic filing of returns and for what is known as digital divide, that reports. In fact, e-commerce tools are is the division of society on the basis effecting the administrative reforms of familiarity and non-familiarity with aimed at speeding up the process of digital technology. granting permissions, approvals and (iv) Increased risk due to anonymity licences. In this respect, the provisions and non-traceability of parties: of Information Technology Act 2000 Internet transactions occur between are quite noteworthy. cyber personalities. As such, it becomes difficult to establish the identity of the parties. Moreover, one does not know 5.4 Limitations of e-Business even the location from where the e-business is not all that rosy. Doing parties may be operating. It is riskier, business in the electronic mode suffers therefore, transacting through internet. from certain limitations. It is advisable e-business is riskier also in the sense to be aware of these limitations as well. that there are additional hazards of (i) Low personal touch: High-tech it impersonation (someone else may may be, e-business, however, lacks transact in your name) and leakage warmth of interpersonal interactions. of confidential information such as To this extent, it is relatively less credit card details. Then, there also suitable mode of business in respect are problems of ‘virus,’ and ‘hacking,’ of product categories requiring high that you must have heard of. If not, we will be dealing with security and safety personal touch such as garments, concerns of online business. toiletries, etc. (v) People resistance: The process (ii) Incongruence between order of adjustment to new technology and taking/giving and order fulfilment new way of doing things causes stress speed: Information can flow at the and a sense of insecurity. As a result, click of a mouse, but the physical people may resist an organisation’s delivery of the product takes time. plans of entry into e-business. This incongruence may play on the (vi) Ethical fallouts: “So, you are patience of the customers. At times, planning to quit, you may as well due to technical reasons, web sites quit right now”, said the HR manager take unusually long time to open. This showing her a copy of the e-mail that may further frustrate the user. she had written to her friend. Sabeena (iii) Need for technology capability was both shocked and stunned as to and competence of parties to how her boss got through to her e-mail e-business: Apart from the traditional account. Nowadays, companies use 3 R ’ s ( R e a d i n g , W R i t i n g , a n d an ‘electronic eye’ to keep track of the ARithmetic), e-business requires a computer files you use, your e-mail fairly high degree of familiarity of the account, the websites you visit etc. parties with the world of computers. Is it ethical? 2024-25 Chapter 5.indd 123 9/2/2022 2:12:15 PM  124 BUSINESS  STUDIES Table 5.1 Difference between Traditional and e-Business Basis of distinction Traditional business e-business Ease of formation Difficult Simple Physical presence Required Not required Proximity to the source of raw Locational requirements materials or the market for None the products Low as no requirement Cost of setting up High of physical facilities High due to fixed charges Low as a result of associated with investment reliance on network of Operating cost in procurement and storage, relationships rather production, marketing and than ownership of distribution facilities resources Nature of contact with Indirect through the suppliers and the Direct intermediaries customers Hierarchical - from top level Non-hierarchical, Nature of internal management to middle level allowing direct vertical, communication management to lower level horizontal and diagonal management to operatives communication Response time for meeting customers’/internal Long Instantaneous requirements Horizontal/flat due to Shape of the Vertical/tall, due to hierarchy directness of command organisational structure or chain of command and communication. Sequential precedence- Simultaneous succession relationship, (concurrence) different Business processes and i.e., purchase - production/ processes. Business length of the cycle operation - marketing - sales. process cycle is, The, business process cycle therefore, shorter is, therefore, longer Opportunity for inter- Much more Less personal touch Less. However, for digitable products Opportunity for physical such an opportunity pre-sampling of the Much more is tremendous. You products can pre-sample music, books, journals, software, videos, etc. 2024-25 Chapter 5.indd 124 9/2/2022 2:12:15 PM  EMERGING MODES OF BUSINESS 125 Much, as cyber space is Ease of going global Less truly without boundaries Much, as IT sector is Shrinking among the topmost Government patronage priorities of the government Technically and Semi-skilled and even Nature of human capital professionally qualified unskilled manpower needed. personnel needed Low due to arm’s length High due to the Transaction risk transactions and face-to-face distance and anonymity contact. of the parties Despite limitations, e-commerce is 5.5 Online Transactions the way Operationally, one may visualise three It may be pointed out that most of the stages involved in online transactions. limitations of e-business discussed Firstly, the pre-purchase/sale stage above are in the process of being including advertising and information- overcome. Websites are becoming more seeking; secondly, the purchase/ and more interactive to overcome the sale stage comprised of steps such as problem of ‘low touch.’ Communication price negotiation, closing of purchase/ technology is continually evolving sales deal and payment; and thirdly, to increase the speed and quality of the delivery stage (see Figure 5.2). communication through internet. It may be observed from Figure 5.2 Efforts are on to overcome the digital that, except the stage relating to divide, for example, by resorting delivery, all other stages involve flow to such strategies as setting up of of information. The information is community telecentres in villages exchanged in the traditional business and rural areas in India with the mode too, but at severe time and cost involvement of government agencies, constraints. In face-to-face interaction NGOs and international institutions. in traditional business mode, for In order to diffuse e-commerce in example, one needs to travel to be able all nooks and corners, India has to talk to the other party, requiring undertaken about 150 such projects. travel effort, greater time and costs. In view of the above discussion, Exchange of information through it is clear that e-business is here to the telephone is also cumbersome. stay and is poised to reshape the It requires simultaneous presence of businesses, governance and the both the parties for verbal exchange economies. It is, therefore, appropriate of information. Information can be that we familiarise ourselves with how transmitted by post too, but this e-business is conducted. again is quite a time consuming and 2024-25 Chapter 5.indd 125 9/2/2022 2:12:16 PM  126 BUSINESS  STUDIES Information Technology Act 2000 paves way for Paperless Society Below are given some of the provisions of Information Technology Act 2000 that have made it possible to have paper less dealings in the business world as well as in the government domain. Legal recognition of electronic records (Section 4): Where any law provides that information or any other matter shall be in writing or in the typewritten or printed form, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is rendered or made available in an electronic form; and accessible so as to be usable for a subsequent reference. Legal recognition of digital signatures (Section 5): Where any law provides that information or any other matter shall be authenticated by affixing the signature or any document shall be signed or bear the signature of any person, hence notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied, if such information or matter is authenticated by means of digital signature affixed in such a manner as may be prescribed by the Central Government. Use of electronic records and digital signatures in Government and its agencies (Section 6-1): Where any law provides for the filing of any form, application or any other document with any office, authority, body or agency owned or controlled by the appropriate Government in a particular manner; the issue or grant of any licence, permit, sanction or approval by whatever name called in a particular manner; the receipt or payment of money in a particular manner, then, notwithstanding anything contained in any other law for the time being in force, such requirement shall be deemed to have been satisfied if such filing, issue, grant, receipt or payment, as the case may be, is effected by means of such electronic form as may be prescribed by the appropriate Government. Retention of electronic records (Section 7-1): Where any law provides that documents, records or information shall be retained for any specific period, then, that requirement shall be deemed to have been satisfied if such documents, records or information are retained in the electronic form. Source: Information Technology Act, 2000 expensive process. Internet comes in as customer’s standpoint. We will be the fourth channel which is free from discussing the seller’s perspective in the most of the problems referred to above. paragraphs on resource requirements In the case of information-intensive for e-business. So, are you ready with products and services such as software the shopping list or would you like and music, even delivery can take to rely on your instincts as you take place online. a tour of the shopping mall? Let What is described here is the us follow Rita and Rekha browsing process of online trading from a indiatimes.com. 2024-25 Chapter 5.indd 126 9/2/2022 2:12:16 PM  EMERGING MODES OF BUSINESS 127 (i) Registration: Before online of funds over the Internet using shopping, one has to register with Immediate Payment Services the online vendor by filling-up a (IMPS), NEFT and RTGS. In registration form. Registration means this case, therefore, the buyer that you have an ‘account’ with may transfer the amount for the the online vendor. Among various agreed price of the transaction details that need to be filled in is a to the account of the online ‘password’ as the sections relating to vendor who may, then, proceed to your ‘account’, and ‘shopping cart’ arrange for the delivery of goods. are password protected. Otherwise, Credit or Debit Cards: Popularly anyone can login using your name and referred to as ‘plastic money,’ these shop in your name. This can put you cards are the most widely used in trouble. medium for online transactions. (ii) Placing an order: You can pick In fact, about 95 per cent of and drop the items in the shopping online consumer transactions cart. Shopping cart is an online record are executed with a credit card. of what you have picked up while Credit card allows its holder to browsing the online store. Just as in a make purchase on credit. The physical store you can put in and take amount due from the card holder items out of your cart, likewise, you to the online seller is assumed by can do so even while shopping online. the card issuing bank, who later After being sure of what you want to transfers the amount involved in buy, you can ‘checkout’ and choose the transaction to the credit of the your payment options. seller. Buyer’s account is debited, (iii) Payment mechanism: Payment who often enjoys the freedom to for the purchases through online deposit the amount in instalments shopping may be done in a number and at his convenience. Debit of ways: card allows its holder to make Cash-on Delivery (CoD): As is purchases through it to the clear from the name, payment extent of the amount lying in for the goods ordered online may the corresponding account. The be made in cash at the time of moment any transaction is made, physical delivery of goods. the amount due as payment Cheque: Alternatively, the online is deducted electronically from vendor may arrange for the pickup the card. of the cheque from the customer’s To accept credit card as an end. Upon realisation, the delivery online payment type, the seller first of goods may be made. needs a secure means of collecting Net-banking Transfer: Modern credit card information from its banks provide to their customers customer. Payments through the facility of electronic transfer credit cards can be processed 2024-25 Chapter 5.indd 127 9/2/2022 2:12:16 PM  128 BUSINESS  STUDIES either manually, or through an 5.6 Security and Safety of online authorisation system, such e-Transactions: e-Business Risks as SSL Certificate (see box on, History of e-commerce). Online transactions, unlike arm’s Digital Cash: This is a form of length transactions in physical exchange, are prone to a number of electronic currency that exists risks. Risk refers to the probability of only in cyberspace. This type of any mishappening that can result currency has no real physical into financial, reputational or properties, but offers the ability to psychological losses to the parties use real currency in an electronic involved in a transaction. Because format. First you need to pay to of greater probability of such risks a bank (vide cheque, draft, etc.) in the case of online transactions, an amount equivalent to the security and safety issues becomes digital cash that you want to get the most crucial concern in issued in your favour. Then the e-business. One may broadly discuss bank dealing in e-cash will send these issues under three headings: you a special software (you can transaction risks, data storage download on your hard disk) that and transmission risks, and will allow you to draw digital cash threat to intellectual property and from your account with the bank. privacy risks. You may then use the digital (i) Transaction risks: Online funds to make purchases over transactions are vulnerable to the the web. following types of transaction risks: 2024-25 Chapter 5.indd 128 9/2/2022 2:12:16 PM  EMERGING MODES OF BUSINESS 129 Seller denies that the customer ever locations and service records. Sites placed the order or the customer such as eBay even provide for rating denies that he ever placed the of the sellers. These sites provide order. This may be referred to as protection to the customers against ‘default on order taking/giving.’ default on delivery and reimburse the The intended delivery does not payments made up to some extent. take place, goods are delivered As for the payments, we have at wrong address, or goods other already seen that in almost 95 per cent than ordered may be delivered. of the cases people use credit cards This may be regarded as ‘default for their online purchases. At the time on delivery’. of confirming the order, the buyer is Seller does not get the payment for required to furnish the details such the goods supplied whereas the as the card number, card issuer and customer claims that the payment card validity online. These details may was made. This may be referred be processed offline; and only after to as ‘default on payment’. satisfying himself or herself about Thus, in e-business risk may arise the availability of the credit limits, for the seller or the buyer on account etc., the seller may go ahead with of default on order taking/giving, the delivery of goods. Alternatively, delivery as well as payment. Such e-commerce technology today permits situations can be averted by providing even online processing of the credit for identity and location/address card information. For protecting verification at the time of registration, the credit card details from being and obtaining authorisation as to misused, shopping malls these days the order confirmation and payment use the encryption technology such realisation. For example, in order to as Netscape’s Secure Sockets Layer confirm that the customer has correctly (SSL). You can gain some information entered his details in the registration about SSL from box on history of form, the seller may verify the same e-commerce. In the succeeding from the ‘cookies’. Cookies are very section, we will familiarise you with similar to the caller id in telephones the encryption or cryptography — an that provide telemarketers with such important tool used for safeguarding relevant information as: the consumer’s against data transmission risks in name, address and previous purchase online transactions. payment record. As for customer’s (ii) Data storage and transmission protection from anonymous sellers, risks: Information is power indeed. it is always advisable to shop from But think for a moment if the power well-established shopping sites. While goes into the wrong hands. Data stored allowing advertisers to sell their in the systems and en-route is exposed products online, these sites assure to a number of risks. Vital information customers of the sellers’ identities, may be stolen or modified to pursue 2024-25 Chapter 5.indd 129 9/2/2022 2:12:16 PM  130 BUSINESS  STUDIES some selfish motives or simply for (iii) Risks of threat to intellectual fun/adventure. You must have heard property and privacy: Internet is an of ‘virus’ and ‘hacking’. Do you know open space. Once the information is the full form of the acronym ‘VIRUS?’ available over the internet, it moves It means Vital Information Under out of the private domain. It then Siege. Actually, virus is a program (a becomes difficult to protect it from series of commands) which replicates being copied. Data furnished in the itself on the other computer systems. course of online transactions may The effect of computer viruses can be supplied to others who may start range from mere annoyance in terms dumping a host of advertising and of some on-screen display (Level-1 promotional literature into your e-mail virus), disruption of functioning box. You are then at the receiving (Level-2 virus) damage to target data end, with little respite from receiving files (Level-3 virus), to complete junk mails. destruction of the system (Level-4 virus). Installing and timely updating 5.7 Resources Required for anti-virus programmes and scanning Successful e-business the files and disks with them provides Implementation protection to your data files, folders Setting up of any business requires and systems from virus attacks. money, men and machines (hardware). Data may be intercepted in the For e-business, you require additional course of transmission. For this, one resources for developing, operating, may use cryptography. It refers to maintaining and enhancing a website the art of protecting information by where ‘site’ means location and ‘web’ transforming it (encrypting it) into an means world wide web (www). Simply unreadable format called ‘cyphertext’. speaking, a website is a firm’s location Only those who possess a secret key on the world wide web. Obviously, can decipher (or decrypt) the message website is not a physical location. into ‘plaintext’. This is similar to using Rather, it is an online embodiment of ‘code words’ with some one so that others all the content that a firm may like to do not understand your conversation. provide to others. Key Terms e-Business e-Commerce­ Browser Virus Secure Sockets Layer (SSL) Online trading e-Trading e-Procurement e-Bidding e-Cash ­Business Process Outsourcing Call Centres Verticals Horizontals Captive BPO units Sweat-shopping 2024-25 Chapter 5.indd 130 9/2/2022 2:12:16 PM  EMERGING MODES OF BUSINESS 131 SUMMARY The world of business is changing. e-business and outsourcing are the two most obvious expressions of this change. The trigger for the change owes its origin to both internal and external forces. Internally, it is the business firm’s own quest for improvement and efficiency that has propelled it into e-business and outsourcing. Externally, the ever mounting competitive pressures and ever demanding customers have been the force behind the change. Electronic mode of doing business, or e-business as it is referred to, presents the firm with promising opportunities for anything, anywhere and anytime to its customers, thereby, dismantling the time and space/locational constraints on its performance. Though e-business is high-tech, it suffers from the limitation of being low in personal touch. The customers as a result do not get attended to on an interpersonal basis. Besides, there are concerns over security of e-transactions and privacy of those who transact business over the internet. The benefits of e-commerce also seem to have accrued unevenly across countries and across regions within a country. Apart from becoming digital, the firms are also resorting to a departure from the erstwhile ‘do it all by yourself’ mindset. They are increasingly contracting out manufacturing, R and D as well as of business processes irrespective of whether these are IT enabled or not. India is riding high on the global outsourcing business and has gained considerably in terms of employment generation, capability building and contribution to exports and GDP. Together, the two trends of e-business and outsourcing are reshaping the way business is and will be conducted. Interestingly, both e-business and outsourcing are continuing to evolve, and that is why these are referred to as the emerging modes of business. EXERCISES Short Answer Questions 1. State any three differences between e-business and traditional business. 2. Describe briefly any two applications of e-business. 3. Describe briefly the data storage and transmission risks in e-business. 2024-25 Chapter 5.indd 131 9/2/2022 2:12:16 PM  132 BUSINESS  STUDIES Long Answer Questions 1. Why are e-business and outsourcing referred to as the emerging modes of business? Discuss the factors responsible for the growing importance of these trends. 2. Elaborate the steps involved in on-line trading. 3. Evaluate the need for outsourcing and discuss its limitations. 4. Discuss the salient aspects of B2C commerce. 5. Discuss the limitations of electronic mode of doing business. Are these limitations severe enough to restrict its scope? Give reasons for your answer. Projects/Assignments 1. Compare and contrast the products and their prices available on the internet and in retail shops. Is the quality, customer satisfaction and other factors the same? 2. Study any business unit/company which is using e-commerce, e-business as a way of doing business. Interview some people working there and find out the advantages in practical business in terms of its costs also. 2024-25 Chapter 5.indd 132 9/2/2022 2:12:16 PM